Who Lives, Who Dies, Who Shorts Your Entry
Silicon Valley Bank, Tech VCs, USDC Depeg, Operation Chokepoint 2.0
It’s been a while. Didn’t spend much time focusing on the markets in February but kept an eye from afar.
Not gonna lie. Thought markets would move a lot quicker than it did on the way down.
On my last monthly market update on the 3rd of February, I talked about how markets were looking kinda frothy like those Starbucks sugary drinks.
Here’s a screenshot to get a refresher.
ON THE DOT .
The S&P 500 is down 7.61% from $4180 to $3862
The NasDaq is down 8.70% from $12,200 to $11,138
Apple is down 1.66% from $151 to $148.5
Ethereum is down 16.01% from $1649 to $1385
Bitcoin is down 16.85% from $23,600 to $19,624
Tesla is down 7.88% from $188.27 to $173.44
Coinbase is down 34.83% from $82 to $53.44
Crypto has been looking for an excuse to go down even after hawkish statements made by Jerome Powell and it found that in Silvergate Bank and in Silicon Valley Bank collapse.
Finance Twitter is in full panic mode with Venture Capitalists crying for the US government to come and protect them from losing their money.
Silicon Valley VCs plugged their microphones in and recorded their emergency podcasts and are literally crying on Twitter for big government to prevent this “mass extinction event'“ for thousands of tech startups that are going to maintain American competitiveness against China in the following decades.
People losing money isn’t funny BUT it is entertaining watching billionaire VCs who are usually proponents of the free market begging for government intervention and bailouts when they lose money but slam down any calls for ‘government intervention literally anywhere else.
Of course, they do have a point and way more information as VCs who are in the middle of this mess with their portfolio companies and billions on line than a random teenager on the other side of the globe but just thought it was funny how quick things can change when they happen to you.
Here’s a quote from the All In podcast episode with Chamath Palihapitiya, David Friedberg, David Sacks and Jason Calacanis
“This is basically a Lehman-sized event for Silicon Valley…Unless the Fed steps in here over the weekend, we’re going to see potentially a run on the regional banking system — a cascade like we saw in 2008.”
Bill Ackman has also been really loud on Twitter lately and tweeted that if the US Gov doesn’t step in before Monday, a bankrun will ensue on all banks other than the ‘systemically important banks’ which will destroy liquidity at community and regional level banks and institutions putting further pressure on the system. Here’s his whole tweet.
Also not sure I would trust Bill Ackman’s rants that much considering he tends to get pretty excited whenever he has a position in something.
Remember his famous $27 million dollar bet that ballooned into $2.7 billion at the start of the pandemic and that “HELL IS COMING” interview at the bottom.
Also he continued to support FTX’s SBF even after the fraud was uncovered.
Bill Ackman is the type of guy who would be shouting fire in a crowded theater just so he could get a better view of the movie.
Also this is just another reminder that VCs put money before anything else. In case it wasn’t clear before. At the end of the day, their wallet reigns supreme regardless of how much they tweet about their beliefs or how many CNBC interviews they give.
Back to crypto, one side effect of this SVB collapse is that our boys over at Circle (USDC) had money in this bank. Huh.
Turns out Circle had $3.3 Billion exposure to SVB. Circle keeps a majority of its reserves in BlackRock but has about 25% spread across Bank of New York Mellon, Citizens Trust Bank, Customers Bank, New York Community Bank, Signature Bank and Silicon Valley Bank.
Circle has about $40 Billion in total reserves (1 for each USDC ofc). So this is a pretty significant hit.
Also if Bill “BANKRUNS MONDAY MORNING” Ackman is right, Circle will face even more issues if the other banks are unable to manage their risk right and face the same issue as SVB with the added pressure from a bankrun.
USDC had a pretty spectacular depeg from $1 when the news was announced and caused pandemonium across the entire crypto market. But Circle has released a blog post where they announced that it “will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary”.
So that’s that. Personally, I think Circle can be trusted in crypto.
Ha. That’s an oxymoron. Trusting something in crypto when it’s supposed to be a trust less system and verified by code.
Circle has shown its cards and as long as those cards don’t collapse, it should be fine and reach parity with $1 again. Obviously, after more than a year of this bear market, you shouldn’t have significant portions of your dollars in stablecoin, if you do then you’re probably a slow learner who needs special help.
Also doesn’t hurt to reduce exposure at 98c on the dollar if you are uneasy about USDC after the 14% depeg.
Also doesn’t help that the US Gov is commencing Operation Chokepoint 2.0 against Crypto.
I liked this Nic Carter post on Pirate Wires which explains the whole thing. Not looking good :(
Anyways, what happens now? I have no clue. Probably best to wait. If the US gov ends up bailing out SVB then up only disaster averted, else wait to find out.
Back to crypto hiatus etc. etc. etc.
Thanks for reading. Subscribe to avoid the next bankrun.